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Case Studies

Due Diligence and Field Operations Services Support Corporate Acquisition

With cash to invest, a small venture capital team was looking to purchase strategic high-value assets in the WCSB leveraging the low market cost to maximize returns in the coming years. The small team had funding but needed the technical bandwidth to assess and prioritize opportunities and the ability to run the field operations. Sproule developed a fit for purpose solution allowing the team to successfully complete a corporate acquisition and Sproule continues to manage the assets.

Project Highlights

  • Lowered G&A costs by 55%
  • Reduced field operating costs by 60%
  • Implemented a four-step process for managing liabilities
  • Fulfilled its decommissioning obligations in a safe and cost-effective manner

Challenge

  • Investors identified an opportunity for a corporate purchase but required external support to evaluate the entire operations and capability of the organization. This included assessing the condition of the assets and the commercial, technical, financial and environmental risks involved.
  • The deal uniquely included a sizable capital allotment for the fulfillment of decommissioning obligations and required the client to complete certain decommissioning work within defined capital and time constraints.
  • The producing assets were in a remote area in northern British Columbia making the logistics challenging and the timeline to evaluate field operations tight.
  • The decommissioning obligations were in a winter access only area and the Investors required an immediate plan to execute what would typically be a multi-year program in a single upcoming winter season.

Solution

  • Sproule completed the due diligence of the corporate acquisition, including evaluating land, accounting, field operations, and developing an execution program for the decommissioning obligations.  The assessment included engaging with the existing field staff, assessing their skills and current status of operation.
  • Sproule dedicated a small, integrated team of experts to run the entire company including field operations, engineering, land and accounting functions.
  • We implemented a four-step process for managing liabilities including a LLR check-up, a detailed assessment of forecasts and deposit requirements, a customized liability management program and full field implementation including phase 1 and 2 environment assessments and managing decommissioning programs.
  • To satisfy certain deal requirements, Sproule was involved in creating a trust fund to be used exclusively for decommissioning obligations.
  • Sproule also hired local contractors including members of the First Nations in the area to ensure the most experienced and knowledgeable team was in place to minimize time and costs.
  • The successful program included construction of 30 km of winter access facilities including an ice bridge.

Value

  • Through effective distribution of resources and experience, Sproule implemented fit for purpose asset management and field operations services maximizing the value of the acquisition for the client.
  • Sproule optimized revenue and executed a field plan for the decommissioning obligations.
  • By identifying value-add opportunities to increase cash flow and reduce costs, we lowered G&A costs by 55% and reduced field operating costs by 60%
  • Sproule, on behalf of the client, worked proactively with the BC Oil and Gas Commission and was able to collaborate and share services to further reduce costs.
  • The client was able to fulfill its decommissioning obligations in a safe and cost-effective manner, on-time and under the allocated budget.
Christopher R. Gossen, P. Eng.
Vice President, Asset Management

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